The current level of statutorily required reserves for level term and universal life with secondary guarantees is widely viewed as redundant. In 2014, Jeremy worked with a client to place approximately $1 billion in redundant reserve capacity.

Prior to 20151 the level of the redundancy was determined by the excess of statutorily required reserves above an economic reserve plus a margin (the combined value herein referred to as economic reserves). The assumptions used to calculate the economic reserves were agreed upon between the cedent and the reinsurer.

Jeremy helped by validating the proposed transactions, stress-test the deal model and helped the client identify and analyze each part of the structures to assure that none of the necessary reviews were being missed.

The result was getting all of the client’s needs for redundant reserve funding met with all risks fully analyzed, and done on time and within budget.

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*In 2014 the NAIC passed a new actuarial guideline (AG 48) that changes the way XXX and AXXX policies can be reinsured. Reserves that are calculated in a way similar to the proposed Principle Based Reserves (PBR), must be backed by cash and certain SVO approved assets. The statutory reserves that are in excess of this amount can be backed by other securities (some of which will need regulatory approval).

For more detail on this guideline, please see the Reinsurance Q&A page of this website. Jeremy can help develop structures providing financing for the amounts in excess of the PBR type reserves.